Photograph by Noelle LuchinoParing Down : Paul Geise of Ristorante Avanti says rising food and fuel costs forced him to take some luxury items off the menu.

Going Lean

Soaring fuel costs are powering food service sticker shock. Here's how a few Santa Cruz restaurants and bakeries are dealing with ballooning expenses.

By Christina Waters

The slices of francese at your neighborhood restaurant look a little thinner these days. Butter has been replaced by no butter. Suddenly your favorite cheesecake costs an extra two bucks. And more and more of the predictable side dishes accompanying that filet mignon are now being listed as a la carte options. In fact, that filet mignon itself might not even show up on the menu.

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Welcome to the world of fine dining in mid-2008.

The inflationary squeeze started last year for restaurants and bakeries. Over the past six months the skyrocketing cost of fuels and flours has given food industry professionals the mother of all migraines.

"It's not fun," admits Paul Geise of Ristorante Avanti. "We're stocking less inventory, fewer menu items, and we have to be even more careful than ever about pricing," he says. Avanti has shortened shifts to balance its showcase organic and high-end ingredients. With shipping prices way up, the increase has been passed along to the restaurant.

"Another thing," Geise continues. "There used to be basic items that weren't expensive--sugar, for example. Now everything is high." Avanti has cut out luxury items like poulet rouge heirloom chicken. "We just took that right off the menu," he sighs. "For us, it's about maintaining quality."

Another artisan restaurateur sees labor costs to be even more of an issue than produce. "We're really not seeing a big spike in prices," says Gabriella's Paul Cocking. "We use fairly expensive foods anyway, and the real hit has been taken by places using more bulk items." Cocking contends that "you can't really raise prices in this economic climate--customers are watching their spending." At Gabriella, as for many small-scale dining rooms, labor is the big expense. "Food and fuel costs are less impact for us than labor. We use foods you wouldn't normally find in supermarkets--this type of cuisine is very labor-intensive." Cocking appears calm about the current situation. "The last two months have been pretty consistent with previous years," he tells me. "And if people are already willing to pay $24 for an item, then $26 is not much different."

Lou Caviglia, owner of Clouds in downtown Santa Cruz, also feels that the impact of inflation on his dining room has been less dramatic than in other, larger restaurants. "But we are trying alternative menu listings," he admits. "You can't just keep raising prices." Caviglia's kitchen is using fewer cream sauces, for example. "Cream and butter are the main things we have cut back on. Our Cajun Mac-and-Cheese has become an a la carte item. We've added a 'sides' menu," he explains. "If you want that nice grilled asparagus, you can have it--but now it costs extra."

Rising Cost of Bread
With the cost of flour tripling over the past 12 months, Mark Sanchez of Kelly's Bakery checks his numbers early and often. "Yes, we've increased our prices," he admits unhappily. "But we've seen no downturn in business."

Sanchez says the most difficult aspect of the change was its speed. "We started seeing it last March, but we had no idea that prices wouldn't be coming down again," he sighs. So large are Kelly's flour needs--50,000 pounds every month--that the bakery maintains its own silo of unbleached white flour. "Then there's our organic wheat and rye flour, which we get in bags. Those have skyrocketed," Sanchez reveals. "Fuel costs have doubled, flour costs have tripled and dairy has gone up 30 percent," he explains. "All within one year." In over 20 years of business, "we've never seen anything like this."

The strain is evident in Sanchez's voice. "We've based our business on value and affordability. We painstakingly go through everything to make sure there's no waste, maximum efficiency--every day."

Gayle Ortiz admits that Gayle's Bakery & Rosticceria costs out "our 10 top sellers every week--raising prices as we must." Ortiz says she regrets this aspect of dealing with rising costs. "It's hard for small businesses to raise prices because they see their customers and know their customers and don't want to offend or drive them away." On the other hand, she explains, "we have to stay in business and pay our employees." Even though Ortiz believes some product portions are already overly large, she maintains that Gayle's does not decrease portion size. "We made a commitment not to change how or what we make. We want to be who we have always been and stand for what we've always stood for: quality."

That means "watching food costs like a hawk." Ortiz explains that she's "looking for wholesale customers closer to our business so we won't have to charge them a fuel surcharge, which we must do with those farther away."

Pacific Cookie Company's Larry Pearson agrees that flour and fuel costs are troublesome. "We sell a single product," he reminds me. "When you have a cookie and it sells for 95 cents, if you raise prices--people notice." Currently converting to an "all-natural "product line, Pearson deals with the need to increase prices every year. "You can't shy away from it," he says.

Pearson says that freight and transportation are the big costly issues, even though he tries to "use local suppliers as much as possible." He sees further shortages caused by the government mandate to convert corn into ethanol. "Corn, especially as a sweetener, is in everything we eat," he explains.

Grains are another area of soaring costs. "We're selling tons of flour off-shore," he notes. "And given the low dollar--and now the flooding in the Midwest--prices will really be affected." Media hype drives the market, in Pearson's opinion. "I would assume that the flooding might be good for soil fertility," he points out. "But when the situation is portrayed as bad, prices will respond."

Thinking Big
Unlike small facilities, Bittersweet Bistro needs big answers to the question of spiralling costs. Chef/owner Tom Vinolus' response? Expansion. "We're adding 4,500 square feet of outside dining," he reveals. "We saw the writing on the wall a while ago. This business has gotten very precarious."

Especially for an operation the size of Bittersweet. At 8,000 square feet--not counting the new expansion--Vinolus has to fill 140 seats in the banquet room, 70 in the bar, 75 in the restaurant and 20 in the express deli area. "So we're concentrating more on catering. And when the outdoor facility is done, we'll be able to do sit-down wedding dinners for 160 and hold the ceremony right here," he notes proudly.

In progress are a koi pond, a fountain, a new outdoor bar area, walls, gates, heaters, trellis system--all destined to support the live entertainment and wedding business that Vinolus is banking on. "The shift in our strategy began 16 months ago," he tells me. "Meanwhile, we've added half portions to our menu and I'm doing more of the butchering."

A freeze on hiring and a removal of high-end luxuries has helped hold the line. "You've got to get more and more creative and watch costs very closely," he says. "No more venison or bison--you can't have everything on your menu anymore."